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Oil closes higher, with dollar undervalued and fewer restrictions in China

Oil futures contracts closed sharply higher this Friday (4), in a session in which quotations are driven by the devalued dollar, which gives strength to prices, since the commodity is quoted in the American currency.

In addition, Chinese demand remains the subject of attention, as the country’s rules for dealing with Covid-19 may be relaxed. On the global stage, geopolitical tensions and difficulties in increasing oil production also weigh.

December WTI crude closed up 5.04% ($4.44) at $92.61 a barrel on the New York Mercantile Exchange (Nymex), while Brent for January 2023 rose 4.12 % ($3.90), at $98.57 a barrel, on the Intercontinental Exchange (ICE). In the week, the advances were 5.36% and 5.12%, respectively.

For Oanda analyst Edward Moya, the oil market should not expect many new wells. The $100 level “is coming as the US service sector job market remains robust and, with expectations, supplies will remain tight,” he assesses.

He recalls that the commodity gained strength with more speculation that China is about to adjust its rules for the pandemic. “Chinese demand for oil has been limited, and if that comes back, that in itself could push oil prices up by 5%, regardless of fears of a global economic slowdown,” he projects.

For Commerzbank, any further recovery in Chinese crude oil imports, which is expected to be published earlier in the week, could provide short-term support. After all, “the increase in export quotas should boost the processing of crude oil in China”, he says.

In Moya’s view, there are many geopolitical risks on the table that should keep oil going higher. “If the dollar continues to fall here, the commodity’s strength could be relentless,” he says.

Today, G7 foreign ministers highlighted that negotiations on the Russian oil price ceiling are expected to end in the coming weeks. The ministers also highlighted that they will continue to encourage countries to increase their oil production.

In the case of Iran and the return to the nuclear deal, the ministers made a “clear determination” that the country must never develop nuclear weapons.

Source: CNN Brasil

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